Solar Chic for Charlotte?
c Hinesburg is in high fashion, with oodles of trackers, including a bunch on town land at the wastewater facility. In pursuit of similar wastewater chic, our Selectboard is examining a proposal by AllEarthRenewables for a “solar farm” to be installed on town land at the site of our own septic system on Thompson’s Point. The 14 trackers of this farm would have a combined nameplate rating of 60 kW, and they are expected to deliver about 82,000 kWh per year into the GMP grid, so town buildings can withdraw this energy according to demand, with net-metering.
The financial details of this deal are contrived to permit AllEarth to collect every conceivable tax credit known to man/woman. AllEarth will retain ownership of the installation for five years (and milk the depreciation tax credit, in addition to federal and state tax credits or grants for renewables and REC credits) while we get the energy. For this energy, we will pay AllEarth 20 cents/kWh, but we will receive a “SolarGMP” incentive of 6 cents/kWh from GMP. The net cost of the energy to us is then 14 cents/kWh. This is about ½ cent/kWh higher than what the town pays for electric energy today, but AllEarth asks us to look at the bright side and consider that we will never pay more than 14 cents, whereas electric energy prices will supposedly climb and climb and climb. Furthermore, after five years we can buy the farm at a reduced price of only $122,500 (about 30% of the current retail price), and the farm will then continue to deliver cheap and clean solar energy to the town for another 20 years or so.
The first five years of operation of the farm are pretty nearly income neutral for the town, with a slight loss if energy prices remain constant, and a slight gain (about $ 1,000) if energy prices increase. In a cash-flow calculation attached to its proposal, AllEarth claims that our pay-off will come later, after the town purchases the farm in 2016. The total savings for the town over the following 20 years supposedly will be about $370, 000. If this number were anywhere near right, it would be the best deal since the purchase of Alaska.
Unfortunately, the number is wrong every which way, and AllEarth’s cash-flow calculation is misleading. It is based on a gross overestimate of the future prices of electric energy, and it omits various expenses that drastically reduce the profits, such as the interest due on the purchase money, maintenance and repair of trackers, insurance and replacement of inverters.
AllEarth assumes that electric energy prices will increase at the phenomenal rate of 5% per year. This is far beyond the projections for energy prices made by the Department of Energy (Energy Information Administration Annual Energy Outlook 2011), which estimates that over the next 25 years energy prices will rise at most at the rate of inflation, about 2.1%. Of course, Vermont is a law unto itself, and our green-energy entrepreneurs, with their cozy friends in high places, might succeed in driving Vermont prices above the national average. According to an article by Tom Evslin in VTDigger, if our green entrepreneurs were to get all the feed-in tariffs and incentives they crave, the price of electric energy would become nearly six times what it is now (and your monthly energy bill would go from $110 to $630). But I believe the price increases will remain modest, because otherwise they would seriously damage non-green industries and businesses in Vermont, which would generate a strong political blowback to stop the gifts to the green industry and halt the increase.
My own recalculation of the cash flow, with a reasonable 2.1% inflation rate for energy prices and with corrections for expenses incurred in the financing and maintenance of the farm, shows that the farm operates at a net loss, and its net present value is a few thousand dollars below zero (the actual number is -$2,100, as of date of purchase of farm, in 2016). There is no pay-off— it’s a great deal for AllEarth, but it’s less than zip for the town.

-Hans Ohanian

Note: Hans Ohanian is a member of the Energy Committee, but this article represents his own independent views. The article was not written, reviewed or approved by the Energy Committee.